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Majesco Gets Hostile Hedge Fund Offer

Majesco Gets Hostile Hedge Fund Offer

September 30, 2005 | By Simon Carless

September 30, 2005 | By Simon Carless
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Struggling publisher Majesco, which most recently announced a calamitous third quarter loss of $38.6 million, as an aggressive expansion into higher budget full-price games backfired, is now under attack from hedge fund and previous investor Trinad Capital Master Fund.

Trinad has offered to invest $5 million in the company, according to information announced in a regulatory filing. But the offer, which is subject to due diligence, would have Trinad employees taking over a majority of Majesco's board, effectively taking control of the company.

The hedge fund's letter suggests of Majesco: "Based on our analysis of the Company's publicly-available information and filings, we believe that the Company now faces danger to its continued existence and prosperity due to a number of factors, including its declining business, a disruption of its customer relationships, an immediate need for additional capital and a total lack of investor confidence in the Company."

This offer would come in the form of the purchase of 3.3 million shares of Majesco common stock at a purchase price of $1.50, and seems to be motivated by Trinad's wish to see at least some return on its investment. According to SEC filings, Trinad has previously purchased significant amount of Majesco shares, including over 71,000 at $14 each in October 2004, and the fund, alongside its manager Robert S. Ellin, own more than 2 million shares. These were purchased at anything up to ten times the current share price ($1.42).

Majesco last revealed that it has just $10.3 million in cash and cash equivalents, as of mid-September, and has anticipated net revenues of a mere $60 - $65 million for the year, and losses of a gigantic $40 - $45 million. However, it's unclear that this $5 million offer is necessarily advantageous to the company, since it cedes so much control to Trinad.

If Majesco doesn't agree to this offer, Trinad is suggesting that it may become more aggressive still, commenting: "we may seek to accumulate additional shares to bring our interest to more than 10% of the Company's issued and outstanding shares of common stock, and become more actively involved in the Company."

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